Food cost performance and the impact of lower revenues
If your FC is hitting budget and your revenues are lower than budget, you are truly running a higher Food Cost as a percentage ofrevenues. This creates a significant issue to you bottom line as you are consuming more food than you should be.
Remember, if Revenues are lower than budget than Food Cost should also be lower than budget
To determine the variance from budget the following process should be completed. Budgeted food cost is $4,301 and budgeted revenues are $12,798 to run a 33.6% Food Cost percentage. Your actual food cost is $4,400 and your actual revenues are $11,750.
Sample Exercise
Budgeted food cost is $4,301 and budgeted revenues are $12,798 to run a 33.6% FC percentage. Your actual food cost is $4,400 and your actual revenues are $11,750.
Using this formula $4,400 (actual FC) divided by $11,750 (actual Revenues) = 37.4% FC. You can determine that your actual food cost percentage is 3.8% higher than budget
Try this exercise to see how close your actual performance is running to budgeted expectations
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Kevin J Mclaughlin | Regional Director of Operations